House of Commons Health Committee Foundation trusts and Monitor Sixth Report of Session 2007–08 Volume I Report, together with formal minutes Ordered by The House of Commons to be printed 8 October 2008 HC 833-I Published on 17 October 2008 by authority of the House of Commons London: The Stationery Office Limited £0.00 The Health Committee The Health Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department of Health and its associated bodies. Current membership Rt Hon Kevin Barron MP (Labour, Rother Valley) (Chairman) Charlotte Atkins MP (Labour, Staffordshire Moorlands) Mr Peter Bone MP (Conservative, Wellingborough) Jim Dowd MP (Labour, Lewisham West) Sandra Gidley MP (Liberal Democrat, Romsey) Stephen Hesford MP (Labour, Wirral West) Dr Doug Naysmith MP (Labour, Bristol North West) Mr Lee Scott MP (Conservative, Ilford North) Dr Howard Stoate MP (Labour, Dartford) Mr Robert Syms MP (Conservative, Poole) Dr Richard Taylor MP (Independent, Wyre Forest) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publications The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/healthcom Committee staff The current staff of the Committee are Dr David Harrison (Clerk), Adrian Jenner (Second Clerk), Laura Daniels (Committee Specialist), David Turner (Committee Specialist), Frances Allingham (Committee Assistant), Julie Storey (Secretary) and Jim Hudson (Senior Office Clerk). Contacts All correspondence should be addressed to the Clerk of the Health Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 6182. The Committee’s email address is [email protected]. Footnotes In the footnotes of this Report, references to oral evidence are indicated by ‘Q’ followed by the question number, and these can be found in HC 833–II. Written evidence is cited by reference in the form FTM x for evidence to be published in HC 833–II, Session 2007–8. Foundation trusts and Monitor 1 Contents Report Page Summary 3 1 Introduction 5 2 Impact of foundation status on foundation trusts 6 Introduction 6 Finance 6 Surpluses 7 Borrowing from private capital markets 10 Future capital requirements 11 Cap on private sector income 11 Quality 12 Innovation 15 Governance and local accountability 19 Conclusions 22 3 Impact of foundation status on wider health communities 24 Introduction 24 Relationships within local health communities 25 Surpluses 26 Shift to primary care 29 Commissioning and ‘Darzi blight’ 30 4 Autonomy and regulation 33 Autonomy 33 The result of FTs’ autonomy 33 The Department of Health and the boundaries of FTs’ autonomy 35 Regulation 35 The FT application process 36 Regulation 36 5 Conclusions 39 Conclusions and recommendations 40 Annex A – Background to Foundation Trusts 45 Annex B - further reading 47 Annex C – geographical distribution of FTs 48 Annex D – Healthcare Commission ratings 50 Annex E – Monitor Risk Ratings 62 2 Foundation trusts and Monitor Formal Minutes 64 Witnesses 65 List of written evidence 65 Reports from the Health Committee 66 Foundation trusts and Monitor 3 Summary In 2004, a new type of NHS organisation was established—the NHS foundation trust—which was to benefit from a greater degree of financial and management freedom and different arrangements to improve local accountability. Since then, over 100 NHS trusts have successfully undergone the application process. Before foundation trusts (FTs) were established, there was considerable debate about whether the supposed benefits of these new trusts would materialise and about what the impact of these trusts would be on the wider NHS. Since surprisingly little systematic and objective evaluation of FTs’ performance has been carried out, we decided to hold a one-off evidence session on FTs and their regulator, and to publish a short report on our findings. FTs have some proven strengths. They have performed well financially and generated surpluses. They have been high performers in routine NHS process quality measures. However, much is unknown. It is not clear whether their high-performance is the result of their changed status, or simply a continuation of long term trends, since the best trusts have become FTs. Key aims of FTs were the promotion of innovation and greater public involvement. While we were provided with examples of good practice in both of these areas, again there was a lack of objective evidence. We therefore recommend that the Government commission research to assess all aspects of FTs’ performance objectively so that best practice can be shared with other FTs, and with the NHS more widely. It seems that some of the fears about FTs’ impact on local health economies have not been borne out; however, they have made little contribution towards the Government’s aim of delivering more NHS care outside hospitals with the interesting exception of mental health trusts. This situation is not solely attributable to FTs themselves; rather it is a consequence of the introduction of Payment by Results and inadequate collaboration between PCTs and FTs to manage demand for acute care. FTs’ slowness to innovate and invest was ascribed by many to failure on the part of PCTs to provide strategic guidance. The Government is clearly aware of these deficiencies and has announced plans to strengthen PCTs’ commissioning skills through its World Class Commissioning programme; however, it is unfortunate that this has come after the establishment of powerful FTs in the acute sector and not before. While FTs do not appear to have yet exploited the full potential of their autonomy, witnesses from FTs told us that the ability to make decisions more quickly was important and made a ‘tangible’ difference to the dynamic of their organisations, which we welcome. Unfortunately, concerns persist about what level of Government intervention in FTs’ affairs is legitimate, and the Government must clarify what the appropriate levels of intervention are. Finally, Monitor’s application process and regulatory regime seems to be well regarded. However, a complex regulatory environment of other organisations also surrounds FTs, and in particular there is potential duplication between the Healthcare Commission and Monitor both of which evaluate the quality of FTs’ services. Foundation trusts and Monitor 5 1 Introduction 1. On 3rd July 2008 the Health Committee held a single evidence session on foundation trusts (FTs). Witnesses included Monitor, the regulator of FTs, a selection of representatives from FTs and NHS organisations that work with them, and academic commentators. Coming shortly after Monitor announced the establishment of the 100th FT, taking the proportion of FTs to 43% of all NHS acute trusts and 52% of mental health trusts1, this seemed an opportune time to examine both the impact of the FT programme and their regulator. 2. Unlike the Committee’s usual inquiries, this one-off evidence session was not accompanied by formal terms of reference or a call for written evidence, although we received a number of written submissions. The scale and scope of our inquiry was therefore necessarily limited. However, given the importance of this set of reforms to the performance of the NHS as a whole, and given the surprising lack of published research evidence in this area, we have decided to publish a brief report outlining our findings. Alongside this report we are also publishing the written and oral evidence we received together with a list of further reading.2 3. We took oral evidence from Dr Mark Exworthy, Reader in Public Management and Policy, School of Management, Royal Holloway, University of London; Dr John Carrier, Chairman, Camden PCT; Keith Palmer, Chairman, Barts and the London NHS Trust; Richard Gregory, Chairman, Chesterfield Royal NHS Foundation Trust; Stephen Firn, Chief Executive, Oxleas NHS Foundation Trust; and Dr Bill Moyes, Executive Chairman, Monitor. We are extremely grateful to our witnesses and to all those who submitted written evidence. We are also indebted to Alan Maynard, our Specialist Adviser, for his advice. 4. In our questioning of witnesses, our main focus was on the impact of FT status, first on those trusts that have achieved FT status, and secondly on the wider NHS. Thirdly, and linked to both these questions, we considered FTs’ accountability and autonomy, and the role of Monitor. This short report is divided into these three sections. 1 http://www.regulator-nhsft.gov.uk/news.php?id=1144 2 We have also made use of the small amount of relevant research in this area, including ‘Foundation Trusts in the NHS: does more freedom make a difference?’ Marini et al, Health Policy, University of York, 2007 and Healthcare Commission and Audit Commission, Is the Treatment Working, May 2008 6 Foundation trusts and Monitor 2 Impact of foundation status on foundation trusts Introduction 5. Foundation trusts (FTs) were established as part of the Government’s ‘earned autonomy’ policy for the NHS, offering high-performing NHS trusts greater financial and management freedoms coupled with new, more locally accountable governance arrangements, with the aim of improving quality and financial performance. Annex A provides more information about the introduction of FTs, how they differ from traditional NHS trusts, and other relevant reforms that have occurred at the same time. In this chapter, we examine the impact of FT status on trusts’ performance in a number of areas. These are: • finance; • quality; • innovation; and • governance and local accountability. Finance 6. FTs have greater financial flexibility than other trusts and their finances are closely scrutinised by Monitor, their public regulator. The chief differences of the FT financial regime are: a) An obligation on PCTs to pay FTs at tariff (payment by results) for the volume of services delivered.